Archive for the ‘politics’ Category

You might as well stop feeling queazy about efforts at crowdfunding the purchase of the video that allegedly shows Toronto mayor Rob Ford smoking crack cocaine. After all, you’re going to watch the video, aren’t you?

The crowdfunding efforts (and there are at least 2 of them) have been the cause of no end of amusement, and almost as much controversy as the reported existence of the crack-smoking video itself. After all, while the video purports to show an important public official engaging in criminal activity, buying the video from the drug dealers who currently possess it would mean, well, doing business with drug dealers.

We can start to get a grip on this as an ethical issue by looking at it from the perspectives of both ends and means. The end or goal being sought by those trying to buy the tape is, arguably, an important one. If Ford has a crack habit, this is important, since it speaks to whether he is fit to be mayor. Suspicions have already arisen, shall we say, about Ford’s suitability for office: among other worries, the mayor’s ethical failings, not to mention his erratic behaviour, are well documented.

So the ends here might be worthy. What about the means? Well, the proposed means by which to reveal the truth about Rob Ford involves associating with (or at least doing business with) drug dealers. This, in itself, is probably regrettable. Of course, buying a video from drug dealers is not quite like buying crack from them, but still. When you do business with certain types, the taint can’t help but rub off. But then, it’s a one-off deal, not the forming of a long-term business relationship.

So perhaps we can say that the deal, if it happens, would be merely unseemly, rather than fully unethical. And that’s an important distinction. Too often the question gets posed as “Is this ethical?” when what would be more useful is to ask “Just how bad is this?” We shouldn’t think of these things in binary terms. It’s OK to be vaguely uncomfortable with a course of action, as long as we ask ourselves why. That’s not being wishy-washy. That’s being reasonable.

In the end, avoiding the all-or-nothing judgment is pretty important in a case like this, because it’s very unlikely that many of us (in Toronto, at least) will keep our hands clean. The option most of us will choose is to let Gawker or someone else get their hands dirty — let them do the crowd-sourcing, buy the tape, and so on — and then cackle with glee at the results in the privacy of our own homes.

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Toronto mayor Rob Ford will apparently be keeping his job. An appeals court has overturned a previous court decision that had said that Ford had violated the province’s conflict of interest law.

The decision came down today from the Divisional Court which heard Ford’s appeal of his November conviction. The panel of three judges has now concluded that the original trial judge had made an error in finding Ford guilty under the Municipal Conflict of Interest Act.

Many Torontonians were bewildered by the original verdict, and by the fact that it could result (as required by the Act) in Ford’s removal from office and a multi-million dollar by-election. Ford’s offence, after all, was hardly armed robbery. He was merely accused of participating in a city council vote on a relatively small financial matter. The question under consideration at that vote was whether he, Ford, should return a few thousand dollars’ worth of donations that the city’s integrity commissioner says were improperly gathered. So it’s not as if Ford had stolen the money, or embezzled it. And garnering the donations was not itself a legal offence. The problem lay solely in his having voted on this matter, a matter in which he had a personal stake. Many people wondered how it could be that Toronto could lose its duly elected mayor over such a small procedural matter.

But bewilderment about that initial verdict says more about public understanding of conflict of interest than it does about the substance of this case. Conflict of interest isn’t about numbers; it’s about loyalty. And when we think someone has violated a conflict of interest rule it’s not necessarily because we think he or she has made an improper decision, but rather that we think he or she has failed to keep personal business and official duties separate, and that as a result we cannot be sure about what factors may have influenced that decision. It is also, in the end, about public faith in the decision-making processes of our most important institutions.

Be that as it may, today’s decision means that Ford is not guilty of violating the Act, and hence gets to keep his job. My non-lawyer’s understanding of the verdict is this. The decision seems to turn on a technicality. Ford had been accused of wrongfully participating in a February 2012 debate and vote by Toronto city council over whether he, Ford, should return the improperly-gathered donations. A council vote 2 years earlier had required Ford to pay back that money. But, according to today’s ruling, Council didn’t have the authority to engage in that earlier vote. So it was legally null – effectively, it never happened at all, from a legal point of view. And if the earlier vote “didn’t happen,” then the February 2012 vote that essentially responded to that earlier vote was really moot. And if that vote was moot, it cannot have been improper for Ford to participate.

But the court’s decision today is far from a vindication. Ford keeps his job on a legal technicality, the sort of thing that a layperson could never foresee from a reading of the plain wording of the relatively brief and clear Municipal Conflict of Interest Act.

That’s fair enough, from a procedural point of view, but it doesn’t mean that the mayor didn’t do anything wrong. He still took part in a decision in which he had a personal stake. And as a man in a position of power and trust, he not only should not have done so, but he should have known better than to do so. Even if he knew in his heart that his vote in the matter was unbiased, he should have known that that’s beside the point. What matters is that trust in the system requires decision makers to remove themselves from decisions that pertain to their own affairs. Doing so is essential for maintaining public trust in the system.

We can only hope that Ford will proceed now with uncharacteristic humility, and with more eagerness to learn the rules that govern his position than he has thus far demonstrated.

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A parliamentary committee in the UK has decided, in the wake of the phone-hacking scandal, that media baron Rupert Murdoch is “not a fit person to exercise the stewardship of a major international company.”

This is not exactly good news for Murdoch, but nor is it catastrophic. The parliamentary committee that chastised him has no real power, and certainly not the power to act on its assertion that Murdoch is unfit to run a company.

The power to make that determination, and hence in principle to hobble the UK branch of Murdoch’s media empire, is “Ofcom”, the UK’s Office of Communications, a regulatory agency set up by, but arm’s-length from, the UK government. According to the Washington Post, “The independent agency has the power to take a TV license away from anyone deemed ‘unfit’ to hold one.”

But assertions by a parliamentary committee that a corporate leader is unfit should give us all pause — not to contemplate the fate of the accused, but to contemplate the larger question of governments telling us who is fit to be in business. Trust me, I have no particular sympathy for Rupert Murdoch, but I also think it’s a very good thing that the committee wagging its collective finger at him has no teeth.

One of the virtues of free markets is that governments don’t generally play a role in deciding who gets to be an entrepreneur or who gets to run a corporation. A corporation is a piece of private property, albeit a rather complex and unusual kind of private property. In small organizations, you get to be chief by starting the business yourself; in larger ones, you get hired by the shareholders or (as in the case of cooperatives) by the employees or customers who own the thing.

Contrast this to a communist or feudal system under which an aspiring entrepreneur has to grovel at the feet of some bureaucrat or feudal lord just to be granted the privilege of starting a business and supplying his or her fellow citizens with the products they want and need. Under such a system, you only get to be head of a large, productive organization if government officials give you the nod. Now of course, some people won’t see that as such a bad thing. If you see a corporation as primarily a public institution — one whose goals ought to be public ones — then perhaps you also think its leaders ought to be chosen by (or at least subject to veto by) representatives of the public.

But consider: the committee mentioned above was composed of members of two different political parties. The report the committee issued was approved by a 6 to 4 vote, a vote that divided the committee along party lines. So before you give a hearty cheer for this instance of government censure, remember that under a different system such censure might have teeth, and such a committee could easily be dominated by a party other than the one you prefer.

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Today Canada mourns the loss of Jack Layton, a politician beloved by his allies on the left and grudgingly respected, I sense, by a great many opponents on the right. Layton was, for most of the last decade, the tireless leader of the New Democratic Party (traditionally Canada’s “third” party), and eventually led the party during its historical first turn as the Official Opposition in the House of Commons.

Layton has left behind a considerable legacy of public service, but his career also holds lessons for how we think about business ethics.

One of the things that the market and the realm of electoral politics have in common is that they are both deliberately adversarial. In both politics and business, we want participants (political parties, in one case, and business firms in the other) to compete vigorously with each other, rather than cooperating. The idea is that when participants compete, third parties (voters in one case, and consumers in the other) reap the benefits. Such systems are interesting, and ethically complex. Competitive behaviour is often considered anti-social, and so it requires careful thought to figure out just what the boundaries of competitive behaviour are, when we actually encourage people to act that way.

Here are two facts about Layton that serve as perfect illustrations.

First is that he spearheaded an effort to bring greater civility to debates in the House of Commons. This is not surprising, coming from the Federal politician voted to be the one that Canadians were most likely to want to have a beer with. But that sort of effort is also absolutely essential to any adversarial system. Just as norms of good sportsmanship keep violent games like football and hockey within reasonable boundaries, norms of civility in politics keep that game from devolving into something intolerable.

But some may also recall that Layton was declared (by impartial academic researchers) the “least civil” participant in recent Canadian parliamentary debates. Critics were quick to use that story as ammunition against the affable politician. But the authors of that study rightly pointed out a structural reason for Layton’s place in the ranking: Layton was leader of one of the opposition parties, and zealous debate in Parliament is one of the opposition’s few tools in Canada’s parliamentary system. Canadians would have been worse-off if Layton, in his role as leader of an opposition party (and later as Leader of the Official Opposition), had been more polite.

Clearly the challenge Layton faced — by all accounts met admirably — is the same one faced by business leaders everywhere. And that is how to compete zealously in order indirectly to promote the common good, while at the same time resisting the entirely-natural temptation to behave in such a way as to bring the entire endeavour into disrepute. Competing in a zealous but civil way is a crucial part of Jack Layton’s legacy, and a crucial challenge for all leaders in the worlds of both politics and commerce.

——-Correction: the original version of this blog entry claimed that Layton was Leader of the Official Opposition during the time-frame of the academic study mentioned. That was incorrect, and has been fixed above.

I’m returning home today after spending the weekend at the Annual Meeting of the Society for Business Ethics, the world’s foremost association for academics engaged in the study and teaching of issues related to business ethics, corporate social responsibility, and so on. (It was a fantastic meeting and anyone with a professional interest in these issues should consider joining SBE.)

One of the dominant themes of this year’s meeting was the role of the corporation in the political realm. It’s an old topic, one revitalized by the US Supreme Court’s decision last year in the Citizens United case. Corporate involvement in the political sphere takes many forms (from lobbying to campaign donations to participation in collaborative approaches to regulation). Such involvement is probably inevitable, but definitely controversial, and so there’s lots to sort out regarding how we should understand corporations in the political realm, and what rights and responsibilities they should have in that world. Among several dozen scholars presenting their research at the SBE meeting, a striking proportion of them presented work related to this set of topics.

David Ronnegard and Craig Smith, for example, presented work that elucidated the connection between competing theories of business ethics, on one hand, and competing theories from political philosophy, on the other.

Anselm Schneider and Andreas Scherer presented their work on the changes in corporate governance necessitated by (what I would call) the quasi-governmental responsibilities that corporations sometimes take on in the international sphere.

Pierre-Yves Néron presented work arguing that the way we think of corporations in the public sphere ought to be strongly influenced by thinking about the kinds of corporate behaviours (including regulatory lobbying, for example) that can either improve or frustrate market efficiency.

Waheed Hussain presented his work on what it might look like to “civilize” the corporation to make its participation in the political realm less worrisome — essentially, by fostering among corporations a “public interest” ethos, and insisting that lobbying etc be framed in terms of the public good.

Wayne Norman encouraged his fellow business ethicists to pay more attention to regulation, rather than focusing (as the typically do) on the corporate ethical obligations that go “beyond mere compliance”.

I myself presented some of my current thinking on the various ways we might think of corporations in their interactions with government. In particular, I argued that while, in some cases, it makes sense to conceptualize the corporation as an agent in its own right, there are other cases (perhaps many more cases) in which it makes sense to think of the corporation as a tool or technology used by citizens to advance their goals. (This is something I’ve touched on before, informally, in a blog entry.)

Although I don’t want to speak for my colleagues, it seems safe to say that the scholars whose work is noted above share an interest in better understanding what it means, and what it should mean, for corporations to be political agents. They are part of a trend — I don’t yet want to say movement — that sees scholars attempting to take seriously the complexity of the practical and philosophical problems raised by having limited-liability, joint-stock corporations participate in a realm that is generally thought of as being rightfully the place of flesh-and-blood citizens.

This is a blog entry ostensibly about municipal politics, but with real lessons for the world of business.

I was on CBC radio yesterday (along with corporate governance expert Prof. Richard Lelblanc) to talk about conflict of interest case involving Halifax’s city council (technical the Council for Halifax Regional Municipality).

To make a long story short: the Mayor was involved in some financial irregularities that may (I honestly don’t know) just be a matter of either poor judgment or poor understanding of proper procedures. Whatever. The interesting part came when some members of Council wanted to reprimand the Mayor for his role in those decisions. The Mayor insisted on chairing the discussion, and indeed even voted on the matter when it came up for a vote. (Here’s an article about the fiasco, by Michael Lightstone for the Chronicle Herald:Halifax council won’t suspend mayor.)

Needless to say, in participating in the vote over his own fate, the Mayor was in a rather significant conflict of interest. He had an official duty to exercise, one that required the exercise of judgment. And he clearly also had a very significant personal interest in the matter, one that any reasonable outsider would be justified in suspecting of influencing the Mayor’s judgment.

Now it always bears repeating: conflict of interest is not an accusation. It is a situation one finds oneself in. There’s nothing unethical about being in a conflict of interest. (If a lawyer finds out that one of her clients wants to sue another of her clients, she is in a conflict of interest, through absolutely no fault of her own.) What matters is how you deal with the conflict.

The best thing for the Mayor to do would have been to:

recognize the conflict,

put it on the table, and

recuse himself (i.e., hand over the gavel, decline to vote, and preferably leave the room so that the rest of Council could have a full and frank discussion).

What’s really at stake in conflict of interest has very little to do with the integrity of individuals. Rather, it has to do with the integrity of a decision-making process, and of an institution. So the worry is not that the Mayor would necessarily have been biased in how he chaired Council that evening. Maybe he bent over backwards to be fair in his chairing duties. Who knows? And that’s the point. We don’t know, but for important institutions we need a high level of certainty that key decision-makers are exercising their judgment in the interests of those they serve, rather than themselves.

And there, of course, is the lesson for the world of business, and in particular for corporate governance. A Mayor, effectively, is the CEO of a City. In addition, he or she also is “chair of the board of directors,” where the board here is City Council. In the world of municipal politics, it is relatively rare for Council (normally chaired by the Mayor) to sit in judgment of the Mayor as chief executive. But in the corporate world, such judgment is a big part of the job of a board of directors. And that is precisely why it is widely considered “best practice” for the CEO not to also serve as Chair. One of the Board’s key roles is to advise and oversee the CEO. Doing so requires that the Board be able to deliberate in a way that is reasonably independent from the CEO’s own influence. Any organization that has the CEO act as chair of the very body that must regularly deliberate over his or her own performance is not just “finding” itself faced by a conflict of interest, but is actively constructing one.

The controversy over Wikileaks has raised the question of whether companies should do government’s bidding. One popular suspicion is that Mastercard, Visa, and PayPal stopped acting as conduits for donations to Wikileaks not on principled grounds, but rather due to government pressure. If that’s true, is it ethically acceptable for business to act that way, as a tool of government? I’m not talking about government contractors, including military contractors like Blackwater, though I suppose the comparison is not entirely ridiculous. I’m thinking broadly of companies (ones not in the employ of government) helping to enact public policy or to implement the will of government more generally.

From a moral point of view, the question has to hinge in part on the moral quality of the particular thing business is being asked to do, and that may in turn hinge in part on the moral character of the particular government involved. Think, for example, of the controversy over Google participating in censorship in China. Many people thought it was wrong for Google to implement government policy in that case because they believe the Chinese government’s censoring of its citizens’ internet access to be morally problematic.

It’s worth pointing out that there are times and places where participating in implementing government objectives has been seen as unobjectionable, even patriotic. During both World Wars, companies were expected to participate in the ‘war effort’ by ramping up production, by shifting production to products needed for the war, and by conserving key raw materials. And that sort of active, corporate civic responsibility isn’t limited to times of war. Note that the US Department of Homeland Security expanded its “If You See Something, Say Something” to…

…hundreds of Walmart stores across the country – launching a new partnership between DHS and Walmart to help the American public play an active role in ensuring the safety and security of our nation.

I think it’s also instructive here to consider the relationship between “the state” (roughly, the government) and society. Many people are happy to think of corporations as instruments of society — that’s what motivates much of the CSR movement. We think it right for businesses to be environmentally responsible because we, as a society, value the environment. We want to conserve our resources, and we expect business to do its part. But the democratic state, like it or not, is a legitimate instrument of society. Now, government (including democratic government) is notoriously imperfect. As Churchill said, democracy is the worst system in the world, except for all the rest. But it’s hard to see how you can approve of (or insist upon) corporate implementation of social objectives and at the same time object entirely to corporate implementation of government objectives when those objectives are the reasonable objectives of a relatively-legitimate government.

In the end, it seems to me that if the behaviour in question is not intrinsically unethical (as Microsoft and Yahoo helping China’s government spy on dissidents arguably was) and if the behaviour doesn’t violate the firm’s fiduciary obligations to its shareholders, then it is at least permissible (though not necessarily obligatory) for a business to help implement public policy.

The story is about Dan Coats, a former corporate lobbyist recently elected to the US Senate.

Dan Coats, then a former senator and ambassador to Germany, served as co-chairman of a team of lobbyists in 2007 who worked behind the scenes to successfully block Senate legislation that would have terminated a tax loophole worth hundreds of millions of dollars in additional cash flow to Cooper Industries.
…
As part of the Republican wave in this year’s midterm elections, Mr. Coats will join the Senate again and is seeking a coveted spot on the Finance Committee, the same panel that tried to shut the tax loophole and that the Obama administration has pushed to again consider such a move.

The worry alluded to in the NYT piece, but not explored in any depth, is that of conflict of interest. The vague worry is roughly that there is — well, some sort of conflict between Mr. Coats’ old allegiances and his new position.

The main point of my article is neither to accuse nor to absolve. It’s to point out that we need to get clear on just what the worry is, in any particular situation. A vague worry that “something ain’t right, here” is fine as a starting point, but if we want to go beyond that, and if we want to prescribe smart solutions, we need to get clearer about what the problem is.

Some scholarly definitions cast the matter as a question of judgment. Under such definitions, conflict of interest is said to occur if there is good reason to think that the judgment of the individual in question will be impaired. In other words, will she be able to exercise judgment impartially, or will her judgment be clouded by other factors that ought to, for ethical reasons, be excluded?

Other definitions frame the issue as one about the interests of those being served: a conflict is said to occur if there is reason to doubt the individual’s ability to faithfully serve the interests of those they are sworn to serve.

Whatever their differences, both definitions focus on service. We worry about conflict of interest when the incentives present in a given situation give us reason to doubt the quality of an individual’s service as a trusted advisor or decision-maker. This analysis suggests that, whatever the Conflict of Interest Act may say, the real question in the case of Wright is whether the judgment that he exercises in his capacity as the chief of staff can reasonably be expected to be skewed (consciously or subconsciously) by the interests of his former, corporate, employers.

The same could, and presumably should, be asked about Mr. Coats. But, as always, I am at pains to point out that a conflict of interest is a situation, not an accusation. If there is reason to worry about Mr. Coats’ judgment, that is not a matter of impugning Mr. Coats’ integrity. Rather, it is a matter of considering what measures (if any) are sufficient to make sure that the value of his service to the public outweighs the risks.

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The word “governance” (as in, “corporate governance”) is obviously quite similar to the word “government.” And just as obviously, that’s no coincidence. The two words share the same roots. In the abstract, the word “governance” just refers to the act of governing something. But it’s not just the meaning of the words that overlaps — it’s the people doing the work. At the highest levels, people often move from the world of business into the world of politics, and vice versa.

A few quick points about this.

1) The fact that there’s some flow back-and-forth between government and the corporate world is not at all surprising. After all, there’s considerable overlap in the skill-sets required in leadership positions in both domains. For example, I recently heard a top expert on corporate governance say that ex-politicians actually make very good corporate directors (and that was said based entirely on their skill-set — not, as you might guess, based on their political connections).

2) Some people do question the extent to which one world is good training for the other. See, for example, this recent story about former EBay CEO, Meg Whitman, who is currently in the running to become governor of California: Is EBay a proper primer for a governor? (by Stuart Pfeifer for the LA Times). Here’s one relevant bit:

Some former employees and Silicon Valley observers question whether a forceful corporate executive used to getting her way would be capable of the compromise needed in government.

“You certainly have many more freedoms as a CEO than you do as an elected official,” said Larry Gerston, a political science professor at San Jose State. “We don’t elect kings.”

3) It’s also noteworthy when a major politician acts in a way more common in the corporate world. In this regard, see the review (by Jordan Timm) in this week’s Canadian Business magazine (unfortunately not online yet) of Lawrence Martin’s Harperland, a book about Canadian Prime Minister, Stephen Harper. According to the review,

…this Prime Minister’s office has enjoyed privilege and authority more in the style of the corporate C-suite than the executive branch of a traditional Westminster government. That approach has been responsible for many of the Harper government’s successes, but it has also been at fault for many of its blunders and setbacks. And though the business and political worlds feature very different rules and accountabilities, executives can learn many lessons, both constructive and cautionary from Stephen Harper’s Ottawa.

4) In both kinds of governance (political and corporate) the main challenge lies in turning the will (and values) of the many (votes in one case, shareholders in the other) into decisions by a few (politicians in one case, executives and directors in the other) to be implemented by an in-between number (of civil servants in one case, and of corporate employees in the other). And in both cases, effective leadership seems to require that the leader engage in a combination of a) listening to their constituents, and b) exercising independent judgment.

I don’t have a grand point to make on this topic. But can anyone recommend essential reading on the intersection between corporate and political governance and/or leadership?

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The number one business story of the week is surely the foreclosure story. A number of U.S. banks, including most notably Bank of America, have suspended mortgage foreclosures for the time being due to worries over flawed paperwork.

…Bank of America instituted a partial freeze last week in those 23 states, and three other major mortgage lenders have done the same. The bank’s decision on Friday increased pressure on other lenders to extend their moratoriums nationwide as well.

An immediate effect of the action will be a temporary stay of execution for hundreds of thousands of borrowers in default. The bank said it would be brief, a mere pause while it made sure its methods were in order….

As the NYT story points out, there is considerable pressure on lenders to put the brakes on. Members of Congress and various attorneys general are suggesting that it would be wise to do so.

A few quick points about ethics:

1) In case it’s not obvious, the freeze on foreclosures is an ethical issue, in addition to being a legal one. It involves shifting benefits, burdens, and risks among groups, including homeowners, banks’ shareholders, and taxpayers. (In this regard, it’s worth remembering that the banks are middlemen, essentially mediating a transaction between their shareholders, who have money to lend, and homeowners, who need to borrow. If there has indeed been any fraud or even lack of diligence on the part of the banks, it is an offence not just against homeowners, but against shareholders.)

2) Mortgages are not just like any other product. For starters, a home is by far the biggest purchase most of us will make in our lifetimes. Scale alone makes this an important issue. Further, home ownership is for most people laden with emotion. When foreclosures happen, people aren’t just losing a product; in most cases they lose a home. This is both morally significant, and accounts for at least some of the political attention being paid to the issue.

3) It’s not at all clear that a freeze on foreclosures is good for home-owners (or rather would-be home owners) over all. The ability to foreclose in the event of default is part of what makes it worthwhile for lenders to take a risk in lending money to buy a home in the first place. Also, foreclosures put houses on the market, helping to keep prices down. Fewer foreclosures may mean a rise in prices. (See CNN-Money:Foreclosure freeze shakes battered home market). Since ethics is, in part, about evaluating outcomes, recognizing the effects of the freeze on the full range of stakeholders is ethically important.

He has been writing The Business Ethics Blog since November of 2005. The blog is now exclusively syndicated by Canadian Business magazine.

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